options strategies for november 1st 2011

HI friends,

Purpose of this blog is to share knowledge and spread it to as many members are possible.So i request u friends to refer my blog link to as many traders are possible.

Again i believe in patience and so when nifty rises by whooping 500 pts it takes a break ..

Market outlook for 1st November 2011,Nifty as i said in my previous post nifty first target is 5475.

CALL BUYERS can hold on to their positions.Remember if u r November call buyer u still have time premium on Ur side.Hold and wait is my signal.I will tell u when to exit from calls.Meantime if i fail to update anytime nifty reaching 5450 plus is exit signal.Get out and enjoy Ur profits.

Fast and furious traders can immediately sell 5800 call November preferably or December and buyers can buy 5400 put .first target 5400 next 5200 next ..I will tell you :.

So please read my previous posts to get a jist of what is happening as a overall picture.My posts hereof will only tell what to do when.reason will Ly in my previous post.

ADIOS for today....Happy trading.

bye

NIFTY OPTIONS TRADING NOVEMBER -DECEMBER 2011 STRATEGIES

HI friends,

Let the Business begin,

Here is my motive I am just gonna put market outlook i.e nifty outlook and strategies to be followed by a high risk trader ,moderate risk taker.Trader has to trade according to his risk capacity.Ideally at start don't put too much money on derivatives.Trade with your profits.I may or may not put charts. 

Nifty Outlook November Month -December Month 2011

Daily Basis:- On day to day basis Nifty has still not topped out.So there is moderate bullishness is still left.So on Monday 31st October one can Buy 5500 November CALL with exit at 5450-5475 levels.This is fast and furious short term strategy

Weekly Basis:- Nifty on weekly Basis is already reached the resistance But as daily trend is still intact so this week nifty may likely hit the resistance zone of 5500-5600.So weekly traders who are already on longs need to book profits at 5475 -5500-5600 and wait for further signals.If nifty ends week around. 5400 in spite hitting 5500 then on weekly charts downtrend remains intact.But if nifty is not going below 5400 considerably on week ending basis then signal warning as new uptrend may start.Confirmation will be nifty remaining above 5400 in next week also.I will post what to do further in my next post.Below 5200 buy 4600 November PUTs with exit at 4700 levels as one has to confirm about the further short signal.

Another strategy:-Once nifty hits 5500 zone just enter conservative short by buying 5200 PUT November ,this is very short term as nifty may find support at 5400 so this trade exit is at 5400.

Options Writers will SELL 5800 November or December CALL and relax this trade will guarantee 100% success as nifty cant break these levels.

Monthly Basis:-Nifty was trading in a long term bullish channel since recession bottoming out and larger trend was broken when we made high of 6300 and moved down as far as 4700.So long term channel is broken and Downward channel is started.Monthly traders need to watch for levels of 5400 .Break of 5400 in any month will lead to 4600 support zone.So now Monthly traders same thing buy 5500 PUT DECEMBER OR 5000 PUT DECEMBER and wait and watch levels of 5400. This is not a tip Larger trends don't revert just like a snap.Long term Monthly traders are still short.

Thus combination of week and month will give you success for sure.But Overall 5000 and above nifty staying above that zone will make a start of new bullish trend.I will inform you if trend reverses.

Comments expected.Share your views.

Adios for now.!!!!!!!!!

HOW TO READ OPTION CHAIN

HELLO FRIENDS,

This is final one in the knowledge series.For understanding option buy and selling one needs to understand what is option chain.Option chain is found on the website nseindia.Its a best thing.

Few thing I would like to tell you is following.I am displaying a chart at bottom have a look at it most things I am gonna explain on chart only.Few things before that.

Option is either in the money ,at the money, out of money.Out of money calls puts have less chance of level getting broken so their price is less.Buyer has to decide of risk and high profit margins or safe and moderate returns.

As seen above see what are the factors you are suppose to see in before entering the options.Of that part you need to focus only on LTP i.e Last traded price.

Options Bread and Butter

Hello friends,

                    I am back again.This time we will clear some air over what is Options?How it is traded? How much money I need to get on the boat?

                    One thing i would like my reader to understand is that I cant clarify doubts related to options here and I am not gonna waste time on that here.Explaining options requires a week.So I request my friends to go through the simple options trading guide on one of the best site nseindia.com.

                    But still i want my reader who have idea but still want to clear air over OPTIONS to understand this few bread and butter to enter the CASINO.

                    First of all ask me question why NIFTY Options only? I would answer it in simple words.NIFTY is a best traded,one of the highly traded commodity in the world.Yess I am saying in the world because its a stable instrument.It comprises of 50 best companies in INDIA.It is safe instrument and safe by means it is not so volatile to wipe traders out but not even so DULL to keep investors away.

NIFTY has good liquidity,means at any point of time in current expiry month contract u put 50000 lots Order and it will get an execute.Thats the strength of nifty.NIFTY is now traded on Singapore exchange and US exchanges also giving trader on the globe ample time to hedge,speculate their position.Its the index which follows the fundamentals and technical indicators like a simple Mathematics equation.

Back to main Topic,

   

Options is a Derivative and as per definition of derivative,derivative is the one which derives its value from underlying.Options has 2 segments in its core -PUTS and CALLS.

Its simple when a person feels markets will go down he buys PUT OPTION.

and when he feels markets will go up he buys CALL OPTION.

Now as option is of NIFTY and like i said it follows its underlying and as underlying of NIFTY PUT CALL OPTION is NIFTY itself so we just have to focus of NIFTY alone.yes nifty alone.No need to worry about P/E ratio,profits of individual companies,their dividends,their board meetings nothing.

So now options are buyed and sold just like equities only difference is that u have to decide which month contract to buy.

Options expire at the end of month.Expiry of Options is on last Thursdays of that month.

Now their is a glitch as with equities you have a waiting period,means if today my equity is not on my side i can hold indefinite time ,literally indefinite but with OPTIONS we have to decide everything in that month only.That's why i say its a CASINO. your winning or loosing is decided in that month only. if u don't get out u will loose all ur money.

Now ONE MORE MOST important thing "TIME PREMIUM".One who will understand this will be real player in options.You need to have idea about why is this particular value to this particular option on this particular day.I after 2 years experience can tell what will be value of that options at what level nifty.But as a fresher its difficult.TO this i will give u a simple example buy gold ornament today and sell it tomorrow dealer will surely not give u same price as u bot he will reduce a value ,similarly in options more the number of days u take to square off more time premium will be eaten so eventually ur money is undergoing vapours unless market is moving up or down on ur side daily.SO the same gold u sell after month will undergo massive price reduction if prices of gold stay around ur buy price.

Options is like an insurance.There are two side of insurance buyer side.Buyer side pays premium for the risk and if risk materialize the is earning multiple times.He is not at loss.His loss is limited to premium paid.

Tomorrow if risk does not come he not loosing big.

Seller side is insurance seller,he is undertaking risk for you.why He sees profit on his side.But for him to take this risk market is asking him a lot of premium.Just like futures so options selling is like Futures.

Option buyer wants the price of option to rise and option seller wants the price of option to go towards zero.

So selling an option is called writing option,he is simply risk taker.

Maths: Suppose I buy a nifty call of 5600 current month i am paying around say 50 rs so total amount is 50rs * lot size 50=2500.Option buyers maximum loss is rs 2500 and profit is unlimited.
Option seller earns premium of 2500 and he gives margin of around 25k to broker.Suppose at the end of expiry nifty crosses 5600 ,seller is in loss buyer in profit.
But if nifty does not cross the 5600 ,value of that 50 rs will end to 5 paise,but buyer has lost only 2500.

Value used by exchange to decide on expiry is simple.Your strike price minus current value of nifty.So in above example.Suppose nifty ends on 5650 value is 5650-5600(strike)=50.

One thing a buyer of options should worry is that whether his strike is approaching or he is lagging behind.For a buyer of option nifty crossing his strike is very important.and opposite of that seller crossing of that strike should not happen.

Last and most important thing what are options available on OPTIONS.

1. Buying a CALL means trader is bullish.
2. Buying a PUT means trader is bearish.
3. Selling a CALL means trader is bearish.
4. Selling a PUT means trader is bullish.

Buying a option leads to just a speculation.Selling is to be done when a trader feels that markets will not rise of fall beyond that point.When a trader plays puts and calls in a way it takes position on both sides he is on hedge,

PHEW a long one. But trader should understand this thing.

bye

Nifty Options -The rise of Options

Hello Friends,
                     After 3 years of experience in stock markets i am able to say now I am starting getting a grip of markets.I started with trading in Equities-Day trading,then moved on some time to Delivery based trading on equities.But equities trading requires constant monitoring of stocks day in day out.I dont know people keep talking about time frames trend lines,indicators,Monthly,daily,weekly charts.But at the end of day its of no use becos one bad trade can wipe u out of months earnings.I have did the same and i know how boring it feels.


                     Traditional investors say buy stocks and sleep for years and wake up one day with ur money increased two folds ,five folds.But i used to hate this waiting period.Why should investors worry about company profits ,P/E ratio ?Who is responsible if company ends up in wrong business and stocks don't rise of years together?.I have seen people frustrated and getting out at wrong times.Operators screwing people.

                     So equities if u see are not a good tool to earn money unless we have big recession of 2008 where stocks fell almost 80% and sensex fell from 21000 to 8000 and i will say at tht time when sensex was at 8k it was surely a good buy point.But on normal days and normal years we don't get such huge correction this limiting our earnings capacity.Thus during normal times people just keep on getting bottoms and tops and realize they are getting nowhere.Some succeed in picking the tops and Bottoms,others loose badly.

                     Equities are really not a instrument of earn money.Equities are manipulated 80% of times.Mostly by mutual fund houses,promoters,Operators leaving common investor at mercy of god.


                      So i scrapped the idea to trade on equities and started looking for a good TRADING instrument Then suddenly i got acquainted with derivatives markets.I started studying about derivatives markets day in and out.


                      Derivatives markets in India comprise of Options and Futures.Derivatives i call them as weapons of mass destruction.People don't realise but half of the recession fall was caused by derivatives markets.But after studying and back testing few things i realized its not a market ,its a casino.Literally I mean its a CASINO.If ur bet is right u are a millionaire,if u are trapped on wrong side markets will beat u so badly it will wipe u out of trading for lifetime.Its a Addiction.

                       So I am pursuing this addiction since 2 years there were severe ups and downs but i have prevailed.I started with Futures but Futures carry a lot of margin risk putting u in great danger if u r on wrong side.

       Then I entered the beautiful world of OPTIONS.and from that I work on OPTIONS OPTIONS OPTIONS!!!!!!!!!.


I am gonna make you people life easier.


If u have any suggestions drop a comment.